Following is the unofficial transcript of a CNBC EXCLUSIVE interview with SIPA trustee for Madoff liquidation Irving Picard and trustee's chief counsel David Sheehan. Excerpts of the interview will run throughout CNBC's Business Day programming today.

All references must be sourced to CNBC.

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SCOTT COHN: All right. Let's start out with this milestone that we've reached today. Tell me about the distribution that you're announcing and where we stand.

IRVING PICARD: Well, we're announcing a distribution of a little over $500 million. It's as a result, primarily, of-- settlement funds that we received-- late last week of about-- over a billion dollars from the Tremont settlement. And-- that distribution will be-- the $500 million distribution will be about $0.047.

SCOTT COHN: And-- so, you know, we're-- you-- you've accomplished something that I think few thought possible, probably including yourselves going into this four years ago. More than half of the money has been recovered. A great deal of it is being distributed. Why do you think we've gotten to this point? How is it-- how is it that it's gone so much better than so many people expected at the outset?

DAVID SHEEHAN: I think it really emanates from the team that-- the trustees put together, the people that work on it day in and day out. When we first got into the case, it was a blank slate. You knew there was this massive fraud, $64 billion was originally announced. And what were able to do-- basically, was put that case together and build it in such a credible fashion over a period of time that you had results such as Picower, which was a definite game changer, adding $5 billion to the bottom line and just changed the whole dynamic. But the reason for that was-- that we didn't get that money just because they could sign a check. It's because we were very credible in terms of our allegations, the research that we've done, et cetera. And I think that has contributed greatly to the outcome that we've achieved, that we are, indeed, as I say, very credible to all the defendants in this case.

SCOTT COHN: Four years in-- I mean, going into it for years ago, you had to make heads or tails out of this massive global fraud. Do you have a sense now of how it was structured? Do you have a good idea of kind of where the money is-- where it was flowing? What's your handle on it now, four years in?

IRVING PICARD: I think we have-- we have a handle on where the money flowed. But we're still finding-- that there are areas that we're-- as we're continuing discovery and doing things in the litigation-- that there are a lot of areas that we are still finding. And every day brings something new.

SCOTT COHN: What kinds of-- oh, go ahead.

DAVID SHEEHAN: I was going to add just this, and I think it's fascinating about the case. The case broke and everyone saw it as an affinity fraud. And it's true: Madoff preyed upon his friends, his family, his relatives, and members of the Jewish community. But what we found, by virtue of all of our research and the case that we've built, is that what he really became was part of the financial fabric of the international financial markets. If you look at what he was doing at the end, he was actually funding structured products that were being sold by major financial institutions such as J.P. Morgan Chase and others like that. So, in a real sense, here's a fraud-- fraudster if you will, in the classic, traditional sense of the term. But over time and through his skill and his work, had become part, as-- as I say, of the financial community. He was part of it. So that when it collapsed, even though he looks like an outlier, he's not really a Lehman, he's really not one of those, he was. He was, to a larger extent, a victim-- you know, in the f-- way a fraudster becomes a victim, of being found out. Because he fell as Lehman fell and all the others fell because he was actually part and parcel of that as well.

SCOTT COHN: So, he was sort of a conduit, right? I mean, he was a way for the f-- the financial players around the world to move money around-- and make it look legitimate.

DAVID SHEEHAN: I agree with that. I think a good of that is true. As a matter of fact, the feeder funds, almost all of them were incorporated offshore. Many, many of them had-- investors that were not in the United States, investors throughout Europe and the Caribbean who were investing, and South America. And all of them were investing in these funds which then, of course, turned and invested in Madoff. Even though they purported to be investing in other vehicles, m-- Madoff was ultimately where the money went.

SCOTT COHN: What more do we know about Bernie Madoff himself now, beyond that he was a conduit? I mean, the original thought was that this was a guy who was running this Ponzi scheme for many, many years. Presumably in a Ponzi scheme, he's siphoning off money for himself, living a lavish lifestyle, the customers get ripped off in the end. But it sounds like what you're saying is number one, it's more complicated than that; and also, when you look at Bernie Madoff's lifestyle as compared to other super-rich people, he didn't live that ostentatious of a lifestyle. Was he stealing money-- siphoning money off for himself?

IRVING PICARD: Oh, yes. He w-- he was doing that. But he was sort of living just below the radar screen, if you will. He had houses in Palm Beach, out in the Hamptons. He had a place in France. He had-- several yachts. So, he was-- and he had an interest in an airplane. So, he-- yes, he did live-- he had a good lifestyle. But-- he wasn't living, as you suggested, like the super-rich.

DAVID SHEEHAN: You know, the interesting thing is, is that we know, because we've interviewed Mr. Madoff and the work that we've done in this case, that he really wasn't happy about the structured products I mentioned earlier. Why? Because there was a chance that his fraud would be exposed by virtue of third parties investing, such as banks and others, into him. But he was such a good return. You know, you have to think back pre-2008. A return such as he was giving year in, year out, guaranteed was just too attractive to those institutions to just ignore it. So, even though he wasn't happy about them getting there and that ultimately he was afraid he would be exposed-- he couldn't stop that from happening.

SCOTT COHN: There was a lot of speculation at the outset, and I think you've both talked about this before, about whether Madoff has money hidden away somewhere, whether he still does. Have you-- have you followed that path? Do you think he has money hidden away? Or did he, in fact, turn over what he had?

DAVID SHEEHAN: My sense of it is that we found everything that there is to be had from Mr. Madoff and his family. In other words-- you-- if you read our lawsuits, we allege-- you know, various loans, various transactions, trading in the accounts of themselves. All of those things were there, we found them, et cetera. We have not found any trickle of money, or flow of money, for that matter, into other areas where they took money and created it for later-- a rainy day, so to speak. That did not happen.

SCOTT COHN: So, you've talked to him personally. You've dealt with him. Your people have dealt with him, even while he's still in prison. Tell me the extent of that. Is he being helpful? He said at the outset he was going to help his clients at least get their principle back. Of course, he didn't name names, but-- how helpful has he been or not--

IRVING PICARD: He--

SCOTT COHN: --helpful?

IRVING PICARD: --he-- in my view, he has not been helpful. We-- when—the interviews of him were, really, to confirm the information we found because-- those interviews took place shortly before some of our litigations began and-- we put this case together-- the litigation teams and-- really, from a blank slate.

SCOTT COHN: How frequently are you in contact with him?

DAVID SHEEHAN: Well, we went-- in August of 2010, just before we filed all the litigation, and spent several days with him on two separate occasions with the idea of confirming whether or not all those allegations that we were putting together-- sort of held together. 'Cause we had no one to bounce 'em off of. Recognize, of course, we're dealing with someone who's not to be trusted. But at the same time, we had enough facts to start asking him questions, et cetera. Since then, we really have not been in contact with him since-- only because there's no real purpose to be served in that.

SCOTT COHN: Has he offered any help since then?

DAVID SHEEHAN: Several times.

SCOTT COHN: What type of--

DAVID SHEEHAN: Well, he-- there's always the suggestion that there's more that he could help us with. But when we pressed his counsel to give us an example of that before we start getting on an airplane and fly down to see him, w-- we never get anything that's worthwhile. So, we have not taken him up on those offers.

SCOTT COHN: So, do you think that he does, indeed, have remorse for what he did? Or is it remorse with conditions? I mean, what's been your experience?

IRVING PICARD: I'd say remorse with conditions.

SCOTT COHN: Explain that.

IRVING PICARD: Well, he-- I think he thinks that he's still in control of the situation, so that if you're going to come and interview him he could fix the ground rules. And-- that's not the situation. He also-- reading the press items or the e-mails and things that he's been writing to reporters-- it really doesn't suggest to me that he's remorseful.

SCOTT COHN: So, if you wanted to get some information out him, if you-- if you felt that there was anything to be gained by going to Butner or even to-- if you had a question to ask him at this point, four years in, what would it be?

DAVID SHEEHAN: I don't know that I actually do have a question to ask him-- interestingly enough. I think we've explored this case to-- fairly well, to the point where I think we know the case very, very well. There's not really anything I'd like him to confirm. The-- there are certain trails that, you know, end and we can't pursue them any longer. But none of them seem to-- have any real great value. So, I don't know that we would want to. I think that he-- I agree with-- Irving. I do believe that he has-- not a sense of remorse. I don't even know if I'd put conditions on it. I don't know that he has a sense of right or wrong. That-- that was certainly the case when we were interviewing him. We were asking him about the so-called dark pools of liquidity that are talked about in the financial circles, and that he supposedly used in Europe. And he really got into it and started talking to us like he was a salesman. And I said to him, "Mr. Madoff, you know, you know that didn't happen." And he said, "Yes, but it could've." So, he actually really does believe in what he was selling.

SCOTT COHN: Yeah. But a different kind of fraudster than we all thought going in. Correct?

DAVID SHEEHAN: Oh, I--

DAVID SHEEHAN:--I agree. Yes. Absolutely.

SCOTT COHN: So, what is the difference from what you thought going in when you first picked up this case in the end of 2008 to where we are now? What have you learned about Bernie Madoff?

DAVID SHEEHAN: Well, as I said earlier, I think what we really s-- you know, when you first come in, you know, and-- your first reaction to this, as I said, it's an affinity fraud. That was the word that was out there and that he had taken advantage of all these people. And he had. There was no question about that. But it was only when you started to reconstruct what was going on with the feeder funds. In-- in the early '90s, '92 when the Avellino and Bienes-- SEC investigation took place, that was all individuals. There was, like, 400 different people that were involved there. But after that, that's when the feeder funds and you got much larger and faster. As you start talking about billions and billions of dollars-- to the point where you had $17 to $18 billion worth of assets under management. That's a major player. Not-- just obviously in terms of dealing with the fraud-- in the central level. He was dealing with it at a very sophisticated level, as I said involving other-- and that's other industries. And as a result, you s-- started to see him in a way that was totally different.

That he could manipulate those in a way that was fascinating. That he would be able to do that. That people who were investing $2 to $3 billion with him and they would ask to find out where he kept his securities, he would say no. And they would accept that as an answer. And-- because, again, the returns were just so great. But he had the credibility to actually say that and make it stick.

SCOTT COHN: So there was a lot of-- we know now, a lot of willful blindness among a lot of people. Do we think, at this point, that there were others who—and-- if you can identify them, please do, who were directly involved? Who knew what he was doing, were not just complicit in it by turning a blind eye, but were helping him? How alone was he in carrying this out?

IRVING PICARD: Well, I don't think anybody could carry out-- a fraud this large by himself or herself. And we know that there were 16 or 17 people who worked on the 17th floor at the Lipstick Building-- who were intimately involved. Now, some were key-punch types and probably weren't aware of what they were doing. But we also know that there were a number of them who did know what they were doing. They've either pled guilty or they've been indicted and will g-- be going to trial later in the year.

SCOTT COHN: What about members of the family? Are you convinced now that the-- sons-- I mean, he-- Peter Madoff pleaded guilty, but did not plead guilty to knowledge of the fraud. Ruth Madoff, I mean, did they-- how involved were they? Or was it this willful blindness?

IRVING PICARD: They certain should have been aware. Th-- we've alleged in our complaints certain activities that should have led them to maybe ask questions or-- but know that something wasn't right. Back dating of trades and things like that.

DAVID SHEEHAN: Well, you know, Andrew and Mark-- purportedly ran the proprietary trading operation. It was called market making, but at the end it was almost all proprietary trading by him. And therefore, they're in the market every day, you know, hundreds of securities, thousands being traded, et cetera. And, yet, Mr. Madoff is supposedly going in and out of the market two, three, four times a year, billions and billions of dollars, and there's no volatility, there's nothing occurring, they're not seeing any of that. Very, very difficult to imagine that someone could be that close to the situation-- steps away, if you will, and that they have no idea what's occurring here, not happening. Even though they're partaking in it-- as we've alleged in … as-- as Mr. Picard just said. We have, you know, allegations that are predicated upon the fact they did trades that were backdated. You know, how do you explain that? I mean, I'd love to have my broker be able to backdate my trades to when they would-- guarantee a profit. Only Madoff was able to do that because there were no trades and he made that all up.

SCOTT COHN: And, yet, that-- that raises an interesting point, though. There were backdated trades. We know that. You've documented that. And, yet, nobody seems to have been called to account for that. There was somebody who was making that trade, who was calling and asking to backdate the trade. Why has nobody been called to account, even criminally-- f-- for something like that? Because that's fraud.

DAVID SHEEHAN: I can't speak to the criminal side of it. That's obviously a matter for the U.S. Attorney's office. But on the civil side-- they have, in a sense, been called to account for it. Because we-- the settlements that we had with Mr. Picower or the settlement we had with Mr. Shapiro-- all those involved-- both of those, I should say, involved backdated trading. And they didn't resolve themselves by way of a verdict in trial. They resolved themselves by virtue of a settlement because, as I said at the outset, these are very credible allegations backed up by documentation and thorough research. So, they could really refute that. So, they have been called to account civilly. They've paid damages. They've paid settlements to us. But beyond that-- can't really comment.

IRVING PICARD: And we still have pending litigation with some of those issues.

SCOTT COHN: So, let's talk about some of that. Because we—you have-- as we talked about at the outset-- recovered a tremendous amount of money. But there are some big chunks that are out there. Where do you feel the biggest chunks are that are out there, some of this in litigation that's still pending?

DAVID SHEEHAN: Well, the vast majority of it is in the feeder funds that I spoke of earlier that are located in the islands and-- have, you know, investors throughout Europe. Hundreds of millions of dollars. The settlement that-- that spawned the outcome that we're talking about here today, the $500 million distribution to customers that's going to take place shortly, came out of a settlement with a series of funds under Tremont. They were called the Rye Select Funds and a series of other funds. Those funds-- are paying-- paid over a billion dollars to the trustee in settlement. I think there are many other funds that will pay those kinds of dollars. I-- that's why we're fairly confident that we think that we have a very good chance to achieve 100%-- recovery here in terms of the dollars. Because the numbers that are out there with regard to those funds are so substantial. And the cases we have are very, very strong. And on top of that there is, at this point, an economic incentive for them to settle with us as well, given the amount of money that we've collected and the fact that the claims themselves, as distressed debt, are selling at a very high rate.

IRVING PICARD: And just to add to that, we have claims that we haven't allowed as yet because the people got payments within 90 days. And there may be an incentive for them to pay back certain to those funds and then have their claims allowed. So, that's another area where we may have-- some success in-- in-- the near future in-- in collecting.

SCOTT COHN: One of the biggest pending cases, and I guess this probably gets to what you've been saying about big financial players using Madoff as sort of a conduit, is J. P. Morgan.

DAVID SHEEHAN: Right.

SCOTT COHN: Which you suffered some setbacks with. You're appealing the dismissal of the-- case, the vast -- the majority of the case. What do you allege that J. P. Morgan did and do you think that maybe the way that you went about that case-- in hindsight, was overreach?

DAVID SHEEHAN: Well, certainly we were on the outer edges. Whether we were overreaching or not, obviously, ultimately the court will decide and the case is pending. What we were alleging there is, is that they had a relationship that went back a number of years, over a decade-- several decades, actually. And what they had was an insight into the activities of Mr. Madoff on a daily basis, hundreds of millions of dollars going back and forth in a way that would've suggested that something was occurring that was not trading in the traditional sense of the term and that they had an obligation to look into that under the banking laws. Where we've run into a roadblock is, obviously, the in pari delicto defense, and that is, is that Mr. Picard, in effect, stands in the shoes of Mr. Madoff and BLMIS. And therefore, he, theoretically, is a wrongdoer. Just-- is-- so, that Mr. Madoff certainly couldn't sue, you know, a fellow wrongdoer. Well, Mr. Picard should not be. We think that's very outdated. I think it has no real relationship to reality and Mr. Picard is certainly not going to be one against the bank, turn that money over to Mr. Madoff in Butner. That's not happening. What we're going to be able to do is take that money and give it to the customers who were all victimized by virtue of the fact that this Ponzi scheme continued for years and years and years. Without the assistance of a major bank, that couldn't have happened. So, we feel as though there should be some relief there.

SCOTT COHN: So, J. P. Morgan the--

IRVING PICARD: I'd just like to add to that. I'm a fiduciary and it's my job to go and collect as much as possible for the people who've been victimized. And every time-- money was paid out, it was being paid by other people's money. And, so, it-- the-- all the litigation is really an effort to level the playing field so that the people who haven't been paid in full have a chance of getting paid in full.

SCOTT COHN: And the allegation against J. P. Morgan, though, is-- I mean, it's different from, you know, feeder funds that maybe should've known and turned a blind eye. This was-- this was his primary bank. They were settling his trades. They had a window on the business day to day for years. How could they not have known?

DAVID SHEEHAN: Well, you know, it's interesting you say that. Because if you look at the allegations, which you really don't get much of an examination because of the legal principles-- that I mentioned earlier. They get focused upon because they resulted in the case being dismissed. The allegations suggest that there were people working at the bank that were well aware of the fact that he was highly suspect. As I said earlier, they did structured products. So, in order to do that, there-- it wasn't just the people running the account. There were people who were structuring these investments who had to do an analysis of whether or not that was a safe investment, something that they could take their high-net-worth individuals and place them into. And we alleged this in the complaint and there are literally e-mails where one of the high-net-worth, you know, officers is saying to another, "I heard this is a Ponzi scheme." And the other officer is writing back and saying, "No, I Googled it. It's not." Well, in any sense of the term, that's not due diligence. Everyone knows that. But what it was is that-- and they were not alone. The kind of e-mail traffic among people with funds in other banks is-- we also have evidence of that as well. It's because the returns were just too good and he'd been around so long. So, even though there were all these red flags that people-- such as J. P. Morgan—and others saw, they chose to-- as you said earlier, they turned a blind eye to those because the returns were just too good and they'd been around. So, let's put our money in. We actually have an e-mail where one of them is saying, "Well, even if it's a fraud, we can lose up to $3 billion and it'll be okay." So, they were making a risk analysis, but not the kind that you and I would make.

SCOTT COHN: So, is it your contention that they did this, they, at the very least, turned a blind eye to it and may have facilitated it, and they're getting off on a legal technicality?

DAVID SHEEHAN: Well, yes. I do think so. I'm sorry.

IRVING PICARD: No. I agree.

SCOTT COHN: So, what happens if they prevail in this appeal? Are there other ways that you can still go after them, I mean?

IRVING PICARD: Well, we still have a piece of the litigation that would be pending in terms of the preference money, the 90-day money and some other-- pieces of the litigation that Judge Rakoff did not throw out.

DAVID SHEEHAN: Right. For example, just to give you-- a flavor of that-- as I said, they were involved in structured products. When they did that, they invested through Fairfield-- Fairfield Sentry, which is one of the funds… And-- just on the eve of Madoff going out, when there's a tremendous run on that account-- it goes down by billions and billions of dollars-- they redeemed. All right. Now-- they redeemed only their portion. They left the customers in it, all right. Now, they're suggesting that they did that for, obviously, business reasons. They just did a redemption. But one could easily argue and infer that watching the decimation of that account taking place and the rest of the industry taking a hit that they had knowledge and they took that knowledge and they used it to their advantage. So, that's a lawsuit that will survive-- the appeal. It's a bankruptcy lawsuit saying they-- acted in better faith to retrieve those funds and it's a fraudulent conveyance and we should be able to get it back.

SCOTT COHN: Is that the starkest example of big financial players that used Madoff during the bubble leading up to the crisis, moving money around and so on-- is J. P. Morgan the starkest example of that?

DAVID SHEEHAN: In one sense, yes, because they were his banker. As you mentioned earlier, they handled his accounts. But in terms of size and scope, HSBC certainly rivals them in terms of their involvement. They acted in a variety of different capacities as managers, administrators for many, many of the funds and sold that-- ability.

In other words, "Here we are. We've done this before. We can do it again." So, they're selling that. Yet, when you examine what they did, they actually did no due diligence. So, we see them-- these are our allegations, of course-- which we're very comfortable with in making them. And banks obviously deny those and suggest we're wrong-- more than suggest. They deny it somewhat vigorously. But at the same time, I think that they're-- the evidence will bear it out that they were fully aware of what Madoff was, in terms of-- being-- of, you know, blank-- blank wall that no one really knew, they couldn't penetrate it, he wasn't going to share information.

SCOTT COHN: And-- HSBC, it hangs on the same defense that J. P. Morgan is mounting this--

IRVING PICARD: Yeah.

DAVID SHEEHAN: Yes. That's right. They're all suggesting that in pari delicto bars us from suing them.

SCOTT COHN: And in layman's terms, explain what in pari delicto is.

DAVID SHEEHAN: Well, it's like if you-- if you got two bad guys and they rob a bank and one of 'em ends up getting all the loot, well, the other one decides to sue the other bad guy 'cause he got all the loot, well, that's not a lawsuit that the world is going to allow to take place in the courthouse. They're going to throw them both out, right. So, in effect you have Bernie Madoff, who was the thief, and we're suggesting that these banks are also operating in bad faith. Well, if they're in bad faith and they were in cahoots, as it were, with our friend Mr. Madoff, well, it's not dissimilar from the two bank robbers suing one another. So, the old common law would say you're in pari delicto. You're in bed with them, for want of a better term. So, as a result, you can't now sue them. And as I said earlier, that would be fine if it was Mr. Madoff suing. But to suggest that the legal fiction of Mr. Picard, being Mr. Madoff for purposes of bankruptcy lawsuit, it makes no sense that-- that he should be barred – our view -- and we're, obviously, espousing this quite vigorously to the second circuit-- which has a very strong tradition in favor of in pari delicto. So, it's gonna be a tough hurdle for us to overcome.

SCOTT COHN: I saw the chart that you put together-- to-- sort of the-- the flows of money and so on. And can you-- can you explain what that is? Can you simplify at all what was going on? What was Sonja Kohn's-- function in the Madoff scheme?

DAVID SHEEHAN: Well, if you look at the chart and-- you obviously have, you'll see it's-- what we call, and Irving alluded to it, money in, money out. You know-- it's basically just a Ponzi scheme. So, when she started back in the late '80s, what she formed were a series of funds— …they always have great names. The fraudsters come up with great names for the funds. And she had four or five of them. And each of them was supposed to be a different fund. One was a diversified fund, one was a fixed-income fund-- or a high-- you know, risk fund. But they weren't funds at all. All of them were just faades that she created. Now, there's paperwork behind them, et cetera. And if you look on the chart, what you'll see is all those funds. And that is the money coming in, all right. So, she's using those to attract investors to come in and say, "I can give you great returns" without reviewing the fact that what she's actually doing with the money is giving it all to Mr. Madoff and he is investing it. So, she keeps the faade of those funds up. Then, on the other side, what happens is, is you see the money coming back out. Some of it for redemptions, because to keep a Ponzi scheme going you have to give some credibility to the fact that you're paying the money back. But in addition, a lot of it's going to his family, relatives, and other phony corporations that she created that supposedly are providing services, such as-- monitoring the funds, you know, making sure that they were properly invested. When, of course, none of that was happening. It was all going to Mr. Madoff. So, what she created, the architecture of that -- that you see on that chart is something that took her several decades to put together. All of which of those component parts were used by her to take money in and then to get it back out in a way that made it look as though there was a legitimate operation taking place.

SCOTT COHN: And that's the common thread in all of this, isn't it? That's it's just a churning machine. Everything that he did, it seems, was just to move money in, move money out, and keep it going.

IRVING PICARD: And remember, he was just moving other people's money. And in effect, when he was paying it out here, he was stealing it.

SCOTT COHN: So, we talked earlier about the family. And I wanted-- take you back a couple years to what I assume was a difficult moment for the two of you-- December of 2010, when Mark Madoff committed suicide. How did you learn about that?

IRVING PICARD: I-- either heard about in the n-- I think I heard about it in the n-- on the news report.

SCOTT COHN: And what was your reaction?

IRVING PICARD: It -- I was sad. That was just a very sad happening and-- it's unfortunate. It's-- certainly not something that we wished for him or-- would wish for anybody, for that matter.

SCOTT COHN: His suicide came just a few days after you filed a lawsuit against his wife, his ex-wife, and the children. And by all accounts, he was very upset by that and had decided that he was just never going to escape this. Do you feel any responsibility, in a weird way, for what happened?

IRVING PICARD: No. I-- as I said earlier, it's unfortunate. There were many opportunities when we could've sat down, for example, and tried to settle, negotiate a settlement. And he could've, if you will, be out from under. But-- he didn't choose to do that.

DAVID SHEEHAN: You know, I-- I agree. I don't-- I don't think we can feel a sense of responsibility. No one knew the state of mind, we-- certainly none of us did, of Mark Madoff. And-- not that that would've necessarily guided us, but we had no insight into that. We have an obligation, as Irving said earlier, as a fiduciary. These were very, very serious allegations, ones that we had to bring. The statute was running. Ironically, the day he committed suicide is the last day we could've filed a lawsuit against him. So, we did do it, as you say, several days earlier. So, there's-- all those factors were in play, none of which in-- include us thinking that this was going to have an impact upon his psychological state. That's not where we were coming from.

SCOTT COHN: But suing the children, I mean, is that something that in retrospect, do you think twice about that? I mean, was that a necessary step, do you feel?

IRVING PICARD: We always think twice when we bring a lawsuit. We don't-- we don't bring them Willy nilly. Every case we look at separately and every case we make a decision whether we should or we shouldn't. It's-- in that case, of course, we found that there was a fair amount of money that was funneled to the children and grandchildren. And that those were factors-- that we considered at the time.

DAVID SHEEHAN: Something-- Irving's used this phrase and it's one that we use very, very often, and that is "other people's money" 'cause that's the crux of this entire case. Is that we have to-- you know, there's a number of people out there, we call them actually good-faith litigations. This is a much broader concept than just the children of the Madoffs. But who probably, in-- in the real sense, didn't have a real insight into who Mr. Madoff is. But they got $4 million of your money, of Scott's money. If we don't get the $4 million back, Scott doesn't get a nickel, all right. So, he's out. So, to a large extent, we've exercised great care and discretion. We have not sued everybody that we could've sued. We felt that in a situation of the family, being who they were, being as close that they were, obviously, to Mr. Madoff and what was happening, that we had an obligation, I think, to pursue those funds at that time.

SCOTT COHN: So, you said earlier you feel like you may be able to make 100% recovery here. How much longer do you expect that this is going to go on? How long do you expect you're going to be living the-- living this case?

IRVING PICARD: A lot of it has to do with the litigation. If-- litigation, of course, is hard to predict. But if the litigation were to take upwards, say, two to three years and then-- I think short-- within a reasonable period of time after that-- all the pieces would fall together. But the-- part of it is we're-- looking to-- we're trying to predict how long the litigation would take, and that's always difficult.

SCOTT COHN: But you feel as though you will be able to get all the money back if-- assuming the litigation goes your way and-- continue with--

IRVING PICARD: That's certainly our goal.

DAVID SHEEHAN: But we're fairly comfortable that we're going to do well on-- the appeals that we currently have pending and on-- even if we were to lose, just to make this plain, the suit against the banks that we were discussing earlier, I still think that we have a very good chance of getting there. And it-- let me give—sort of a -- more of a business reason for that. That's-- predicated upon litigation, obviously, 'cause that's how we get the money back. But as I alluded to earlier-- this is Madoff claims, customer claims … that is distressed debt. And in the marketplace today, they're selling at around $0.77, which is an extraordinary amount of money-- built, obviously, around the monies that we've recovered, that the-- those who are trading in those claims. And these are major financial institutions that are trading at this point. Obviously-- you know, the Madoff … are better than Greek bonds. They're going to get a much better return. So, as a result, people are investing in those. What I see the funds doing is they look at that and say-- and these are the funds we've sued who also have claims, who-- which will be allowed as a result of settling with us. That they have a real financial incentive to sit down, and many of them are, talking to us about the notion of settling those claims. Now, settlements always take time. I think-- Irving estimated two to three years, that's fairly accurate. But I think a lot of that will be consumed not just with litigation, which, of course, will take place, discovery, motion practice, all of those things. But I think there'll be a tremendous amount of negotiation going on involving hundreds of millions of dollars in each case where we will be able to resolve them predicated upon the value of the claim itself.

SCOTT COHN: This-- case has become big business for you two, for your firm. $600 million plus in fees as of-- last fall. And I know that those fees don't come from investors, they come from-- from SIPC they come from--

IRVING PICARD: They--

SCOTT COHN: --the member firms that pay it. How much-- how much longer, how much more money is likely to be spent? And is there a point where, for the greater good-- you know, it becomes--

IRVING PICARD: I think the answer is-- in some cases where we're still looking and the discovery is going on-- there would be-- in order to do it, you have to spend money. SIPC has been very supportive of us. If they weren't, they would-- they wouldn't hesitate to tell us. But they've been very supportive of what we've been doing and because we've had good results. And I think so long as we continue to have good results-- we'll continue to have their support. On the other hand, if you look at what's been spent in administration costs, the number that you mentioned, $600 to $700 million-- but to r--we've recovered-- over $9 million in-- in spending that. So-- I think it's important to compare what have the results been rather than just looking at the number by itself.

SCOTT COHN: You said $9 million-- million instead of billion. Maybe you want to resay--

IRVING PICARD: $9 billion.

SCOTT COHN: --that. Yeah.

DAVID SHEEHAN: And I think it's-- just to add to that a little bit and to parse it-- just a bit-- the fees f-- to the firm are about half of that $600 million. The rest go to the accountants and others that we've retained to assist us. But the overall cost is $600 million. And-- I think there's an added factor here. As I said earlier, this is-- this is an enormous endeavor involving multiple lawsuits against very well-armed-- parties on the other side. We're rated against every major law firm in the country, as well as throughout Europe at this point. We have retained counsel in Europe, in the Caribbean, and-- so all of our adversaries have as well. And what you're talking about here is billions. And, so, what we've been able to do through the expenditure of SIPC's funds that has enhanced our ability to bring these lawsuits, is we're very-- as I said earlier, very credible. It gives us a chance to settle for over $9 billion, which tells-- gets to the answer to the other part of your question. And that is, I think that credibility and that momentum will be such that we can bring this, hopefully, to a very satisfactory conclusion in-- in the near term s-- which, in this case, is two to three years, without seeing that there's money that's being spent needlessly, that it is all being spent with the sole purpose of retrieving all of those dollars.

SCOTT COHN: Is there ever, though, any sort of pushback from SIPC saying, "Okay, guys, you've-- done, you know-- wind it down, you know. You've recovered more than anybody ever expected. You know, this is our money. The money that you recovered doesn't go back to them. Wind it down." Is there any sort of pushback?

IRVING PICARD: Not a pushback in terms of winding down. But they do ask questions. They want to know why-- what are-- what do we think the odds may be in a particular lawsuit. And they certainly raise a lot of questions. Because they want to understand what we're doing. And so long as we're giving them credible answers and showing good results-- there's no real pushback.

SCOTT COHN: So, you two have probably the most unique perspective on the Madoff fund. So much has been written and said about this, the failures that it-- exposed in the regulatory system and so on. What do you-- what did f-- what do you think we should learn from it? And what do you think of supposed improvements that have been made since then?

IRVING PICARD: Well, there are a few things that I think, from an investor point of view-- is that you shouldn't put all your eggs in one basket. You should be diversifying your portfolio. You probably should consider using, perhaps, more than one financial advisor if you have a significant amount of money to invest. You want to ask questions. Where are the securities kept? Are you what's called a self-clearing broker or are you an introducing broker? If you have another broker holding the securities, which Madoff didn't, of course-- then you have an additional check on whether the transactions are real or not. So, on that-- from the investor point of view, I think that's one thing. The other point I would make is that-- it's the old song, "If it's too good to be true, it is--" which, of course, it was in this case. On the regulatory side-- I think over the course of the last few years with the-- whether it's Dodd-Frank's or other reasons-- the SEC has made a lot of changes. It's become more nimble, if you will, in terms of keeping up with electronic trading and things that before, three or four years ago, they weren't as up to. And I think-- over a period of time, they're-- they've learned some lessons from this case and a lot of other cases. And-- they've tried to-- make changes-- that will help them keep up with what's going on in the marketplace.

SCOTT COHN: As you look at it, though, from-- again, from your standpoint and having looked at this so closely, are you surprised that he got away with it as long as he did? Or are you not surprised?

DAVID SHEEHAN: I'm really not surprised. I'm surprised only in this sense. The historical perspective is Ponzi schemes don't last this long. And what I've said over time is that-- if there is a genius to Madoff, it was his ability to sustain it as long as he did. Because what he did is he preyed upon, initially, friends. But then he went to charities and went to other organizations, pension funds, et cetera, that would not look for big redemptions, that wouldn't ask him to, you know, give a lot of cash back. Would only ask for small portions over time. And then, when he got into the feeder funds, he was able to do the same thing with them as well. So, there was-- there was a genius to that extent, that he preyed upon groups of people that he could sustain the cash flow that was necessary to keep it going. But-- I think that given the-- fact that there's just hundreds of brokers. As we sit here today, you and I both know there's a Ponzi scheme occurring and somebody is foisting, you know-- a worthless product on someone and they're buying it, hoping that they're going to get a return that they know is too good to be true. But that happens every day. So-- I'm not that surprised. The longevity is more the surprise than anything else. But the fact that he was able to do it, it's-- came back to Irving's point-- about, you know, knowing what you're doing. It wasn't that long ago that individuals didn't invest in the market. The-- you know, it's-- been-- the advent of that is the last ten or 15 years. And I think what they have to become, you know, the old Sy Syms commercial, I don't know if you remember that, where the-- you know, "A sophisticated consumer is our best customer." I think that what's you need to do. You need to become much more sophisticated in the securities arena if you're going to invest in it than just simply turning your money over and entrusting it to someone else. You have to learn about that, what's going on. We have synthetics. We have all kinds of CDOs and other things that people are investing in that even people on the street aren't really fully aware of-- all the import-- of those investments are happen to consumer be unless he really gets educated. So, I think the lesson here is that if you're going to invest in this market today, especially in something like Mr. Madoff, where you're not going to get a lot of insight, you've got to start asking a lot of questions and become really educated.

SCOTT COHN: So, fair bet there is another Madoff out there?

DAVID SHEEHAN: Oh, absolutely. Absolutely.

IRVING PICARD: But probably not this size or with the length of time that this took place.

SCOTT COHN: And let me finally touch on that, the length of time, 'cause that's always a subject of debate. He says '92 is when it started. You've said it's earlier than that. How do you know it's earlier than that? When do you think that it started?

DAVID SHEEHAN: What we have is his records that go all the way back. You know, the one thing-- great thing about fraudsters, they not only have great names for their products, they also love to keep track of everything. And we have records that go back, very solid records, to '83. Which demonstrate that even then, when he was-- you know, doing a different strategy than his split-strike conversion strategy-- he was engaging in-- in-- you know, a Ponzi scheme. And then, we have microfiche and tapes and all kinds of other things that we can put together that's forensic accountants building in the appropriate assumptions that have come to the conclusion it goes back into the '70s that he was doing this. So, we're very comfortable that the '92 is something that he seized upon, it happened around the same time as Avellino and Bienes. So, to whatever-- for whatever reason, he thought that was a good benchmark for him. But that's not really when it-- when it started.

SCOTT COHN: So, he was getting away with this for 40 years?

DAVID SHEEHAN: Yes.

SCOTT COHN: That's mind boggling.

DAVID SHEEHAN: It is.

IRVING PICARD: Yes, it is.

SCOTT COHN: And you can only look back to what? To-- to--

DAVID SHEEHAN: To the '70s and he started in the '60s. And--

SCOTT COHN: Yeah.

DAVID SHEEHAN: --there's no reason to believe that he ever did anything-- other than operate a Ponzi scheme. But-- even though he suggests otherwise, that's not true.

SCOTT COHN: So, how much do you think that-- I mean, you can only recover the-- up to a certain point. How much do you think that he stole over all those years?

DAVID SHEEHAN: Well, w-- go ahead.

IRVING PICARD: No, I think that in terms of what he stole is what is left owed to people, and that's the $17.5 billion. But it-- if-- and, of course, as we s-- said earlier, he-- not all that money was used by him for his-- for his own purposes and-- so-- but the $17.5 billion is what we figure is left out there.

DAVID SHEEHAN: It wasn't so much his. It funded his operation.

SCOTT COHN: Right.

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